Cash payment ban could see property prices rise

by
at 13/06/2012 18:49

A proposal by the Finance Ministry to ban cash payments for sums over 600,000 rubles could lead to price hikes, with residential real estate the most likely to be affected.

The ministry’s proposal, which was published on its site, would include not only transactions between individuals and businesses, but would also include deals between two private parties. The proposal’s explanatory note says the measures are aimed at real estate and car purchases in order to lower their “levels of criminality.” The ministry’s earlier proposal was to only target deals involving companies, Vedomosti reported on Wednesday.

Secondary residential realty market price hike

The main area affected would be secondary property market deals involving chains of several buyers and sellers – 99 percent of these types of property deals involve cash payments, Vedomosti quoted the head of the secondary residential realty market department at Inkom Realty, Mikhail Kulikov, as saying. These deals, involving a series of sales with the cash being effectively passed down the line, account for 80 percent of all secondary residential realty transactions. Such complicated transactions would involve numerous bank fees if completed using non-cash transactions. “All these expenses will be included in the cost of the dwellings,” said Kulikov.

Cars too

Similar bank expenses might also see car prices rise. Larger dealers already provide buyers such services as in-house bank windows, which will accept cash (dollars and euros in particular) and deposit it into an account opened in the buyer’s name so it can be transferred to the car dealer’s account. Smaller dealers, however, would also need to introduce similar banking services – for a fee, naturally.

“Clearly,the higher theamount of the purchase, the more money will have to be paidon top,” RIA Novosti quoted the commercial director of the Gneser group of companies, Igor Bogatyrev, as saying in late May. He added that Russians would hardly welcome the convenience of not having to carry large sums of cash to the auto dealers. “Only if the Finance Ministry forces the banks to forgo their commissions,” he added.